Terminal condition

By Zhang Zhilong Source:Global Times Published: 2012-8-15 18:50:04

Airplanes park at Beijing Nanyuan Airport, which unveiled a new terminal on July 6 after a large-scale expansion and renovation that cost 350 million yuan. China United Airlines, the only commercial airline using Nanyuan, said the airport is now able to serve 6 million passengers a year, more than doubling its capacity. Photo: CFP

China is to build 82 new airports and expand 101 existing ones in the next few years. But this campaign, touted by officials as boosting local economies, has sparked doubts, since many airports are operating at a loss and many passengers are angry about the state of the airline industry.

The campaign is to be carried out during the 12th Five-Year Plan period (2011-15), the Civil Aviation Administration of China (CAAC) announced on July 20. Most of the new airports will be built in China's less-developed central and western regions.

Li Jiaxiang, director of the CAAC, stated at a press conference on July 20 that China's airport construction lags far behind many countries and there are still too few airports in China, instead of too many.

Commentators disagreed with him, stating that China's drive to build more airports makes no sense in a country where per capita GDP lags much behind other nations like Brazil.

Airport construction cannot operate too ahead of its market demand as shown by lessons learned during China's high-speed rail construction, wrote Bi Ge, a commentator for National Business Daily, in July.

High-speed rail was once thought to be a pillar industry for both China's transportation infrastructure and its economy, but overly rapid expansion finally proved to be its undoing. Only when people's income reaches a certain standard, can expensive flights become a viable option for them, Bi commented.

In its latest report, Forbes also doubted China's need for so many new airports and pointed out that many airports in China are "sinkholes," citing statistics from the CAAC that 135 airports of its 180 existing ones lost more than 2 billion yuan ($314.4 million) last year.

Money flying away

A staggering 90 percent of China's small- and medium-sized airports are losing money, according to the Xinhua News Agency. Their income mainly comes from airplane landing fees, but these often cannot cover the subsidies airports pay to airlines. These very subsidies are used to encourage airlines to open up new air routes, closing a vicious circle.

Airlines rely on these subsidies since they are usually unwilling to trust the financial viability of new routes to airports which only receive a small number of passengers.

For example, Huai'an Lianshui Airport in Jiangsu Province received just 230,000 passengers in 2011, making it the emptiest airport in the province, reported 21st Century Business Herald in June.

A small airport needs a minimum of 500,000 passengers a year to make ends meet, according to Li Xiaojin, a professor with the Civil Aviation University of China in Tianjin.

According to Xinhua, all airports in Jiangsu lost money last year, except two large ones in Nanjing Lukou Airport and Wuxi Shuofang Airport. Local governments end up footing the bills for these deficits by subsidizing the airports.

Zhanjiang Airport in Guangdong is in even worse straits, facing an estimated deficit of 40 million yuan this year, according to CAAC.

Lianshui Airport refused to comment on its profitability to the Global Times, as did two other small airports.

Vanity takes to the skies

Despite losing money, local governments still try to build new airports, often as vanity projects. One of the reasons for this ongoing popularity is due to the aviation industry remaining State-owned, with only limited access from the private industry.

This has created a scenario where the officials who push for these airports do not face the responsibility of their operational failure, since the investment was paid for by a wider authority.

Li Jiaxiang, the CAAC chief, counters this by saying that small- and medium-sized airports now cover 70 percent of the country's rural areas and contribute a lot to local economies, even when losing money.

It is true that some airports, such as Yunnan Tengchong Airport, are making it.

Statistics show that in 2009, Yunnan Tengchong took in twice the number of passengers seen in 2008, and has already exceeded target numbers for 2015. It has proven to be a solid calling card for the development of service industries like hotels, catering and tourism.

Though most small airports are losing money, nationwide all 180 airports made combined profits of 4.6 billion yuan in 2011, Li said.

He argued that some facilities were losing money due to there being too few airports in China. He cited that the US has 19,000 airports while some developing countries like Brazil and South Africa have more than 700.

"It's like planting trees. One tree will die, but if you plant more, a forest will sprout, and the trees will grow higher and higher," Li said at the conference, noting that all 12 regional airports in Yunnan Province were profitable due to a "network effect."

"An airport is like a small city, which can help the development of every industry and provide job opportunities," Zhang Qihuai, a lawyer and expert in aviation industry, told the Global Times,

Zhang said that waiting for per capita GDP to grow is not the right attitude to have. A region should base its airport construction on staying ahead but not too far beyond market demand.

"It is not enough to just build airports. Local governments should also encourage airlines to open air routes," said Li Lei, an aviation analyst, to the Global Times. He added that local governments must cooperate with airlines or establish their own to allow continuous investment.

"The policy of building new airports cannot simply be discredited by wholesale airport numbers," said Zhang. He explained that if distribution is carefully monitored, problems will drop.

Concerning the CAAC's latest initiative, Li Xiaojin agrees that central and western regions, which are not yet connected to the country's high-speed rail network, need more airports as well as better road access.

Zhang proposed that lessons be taken from the development of high-speed railways, and insists that each new airport should be well-planned, designed and managed.

One example given by Zhang Qihuai is Yichun Airport in Heilongjiang Province, which failed due to being in the wrong location as it was not safe for planes to fly there at night.

An airplane from Harbin, Heilongjiang's capital, crashed in Yichun on August 24, 2010, killing 42 people.

"It is better not to fly directly from big airports, like in Beijing, to small airports," an insider told Caixin magazine in July, explaining that many small airports are poorly equipped and unsafe.

No cooperation

When airports are built in quantities that far out-supply market demand and the density of neighboring airports is not taken into consideration, deficits and fierce competition will become commonplace. Zhuhai Airport in Guangdong Province falls into this category.

Zhuhai Airport opened back in 1995, and was once well-known after winning various titles, such as being the biggest civil airport of the time. However, it later became tarred as being a vanity project.

Local officials often place political achievement ahead of investment benefits or sound business plans, because most airports are State-owned. Zhuhai Airport is the result of the blind pursuit of political achievement, said Yan Lieshan, a commentator based in Guangzhou.

As to the deficits, they are partly caused by too many airports competing with each other in a specific region, according to Yan. For example, around the Pearl River Delta, five big airports in Hong Kong, Guangzhou, Shenzhen, Macao and Zhuhai compete for a lot of passengers.

Other problems are often seen. Flight delays have become the prime gripe for increasing numbers of passengers. Various reasons are often given to try and explain these delays away, such as bad weather conditions, but the odd phrase of "air control" is that used the most often.

Beijing Capital International Airport told the Global Times that when it comes to air control, they are simply following orders issued by the air control department of the CAAC.

The CAAC did not respond to interview requests by press time.

Air control is a major issue, given that 80 percent of China's air space is controlled by the army, said analyst Li Lei. His idea is also shared by commentator Yan.

"The way the army controls air space is just like that seen in war time. Is this really necessary?" Yan questioned. He said that even the limited 20 percent of air space open to civil aviation is not equally treated either.

"There is a priority ladder to the skies. Leaders fly first, then VIP passengers, forcing ordinary members of the public to wait as the last ones to fly," said Yan. He added that unfair competition also happens between airlines, with smaller companies usually having to yield to the priority schedules or routes of their larger competitors.

Li Lei pointed out that the CAAC has been negotiating with the PLA for years, seeking more allowances for civil aviation, but all to no avail so far. For professor Li Xiaojin, the only way out of this impasse is for the CAAC to come to terms with the PLA about jointly overseeing the skies, but this will take time.